Otto boosts stake in Philippines oil project

Philippines-focused explorer
Otto Energy
has moved to take greater control of the Galoc oil venture, buying out trader Vitol’s stake for $US18.7 million.

Otto agreed to increase its stake in the venture from an indirect 18.78 per cent to a direct 33 per cent and will take 100 per cent ownership of the company that operates the field, which produces 6800 barrels of oil a day.

The deal entails a series of transactions in which Otto first buys a 68.62 per cent stake in Galoc Production Company from Vitol then on-sells a 26.84 per cent stake in the venture itself to Singapore energy investment firm Risco Energy.

Otto, which halted its shares from trading yesterday pending the announcement of the deal, said it would pay for the purchase with cash reserves.

The acquisition, priced at the equivalent of $US19 a barrel of proven and probable (2P) reserves, will increase Otto’s 2P reserves by almost 1 million barrels, adding 640,000 barrels of contingent resources.

Otto said gaining operation of the venture was a crucial step in its development from an exploration company to an integrated oil and gas producer. It would also save costs from the consolidation of the office of Galoc Production Co in Manila with its existing Perth and Manila offices.

Otto’s acting chief executive, Matthew Allen, described the acquisition as “an attractively priced, low-risk opportunity" for Otto to increase its share of revenues from Galoc plus better leverage its expertise by taking over as operator. Revenues from Galoc would grow as the partners moved towards a Phase 2 expansion of the project, targeted for a final investment decision early next year, he said.

Nido Petroleum
and local Philippine companies also hold stakes in Galoc.